Wednesday, April 27, 2011

The Ace that Tata served

Tata Motors' Ace has made entrepreneurs of its customers at the lower reaches of the pyramid..


Basant Yadav came to Mumbai 15 years ago. The search for a livelihood forced him to migrate to the metro which he had seen only in Bollywood movies.

He started as a driver on daily wages in the Mumbai suburb of Goregaon, more than 1,000 km away from his hometown in Uttar Pradesh. In the next three years, he graduated to being the owner-driver of a secondhand Bajaj Tempo. The small-scale industries in Goregaon offered him good business. In 2000, he bought a Tata 407 on loan, this time a fresh buy from the showroom.

When Tata launched the sub-one tonne Ace light truck in 2005, Basant Yadav was one of the first three buyers. Small units of textiles, toys and furniture spread across the Goregaon industrial area fuelled his transport business.

His Ace trucks ferry goods to and from small towns in Maharashtra such as Ratnagiri and Chiplun. Carrying the movables of those returning to their hometowns, these four-wheel small trucks have travelled from Mumbai to as far as Jabalpur and Indore, claims Yadav.

Delivering the goods:Basant Yadav who owns nine Aces, with one of his vehicles.

Now, Basant Transport Service (BTS) which he jointly runs with his four younger brothers, has 17 vehicles, nine of which are Aces. “In the narrow lanes of Mumbai suburbs, the Ace is an ideal goods carrier. It can get through the congested streets fairly easily,” he says.

“It has got flexibility and multiple utility. I get numerous calls asking for the mini truck every day, that is why from one Ace in 2005 I now have nine,” he says. “Every year he buys one or two Ace from us,” testifies Sumeet, a sales person with Bafna, a Tata Motors dealer in Mumbai.

Basant Yadav's is not a lone story. Five years ago when the Ace was launched, it caught the fancy of many small-time transporters, poultry owners, laundry men, vegetable vendors and scrap dealers across India. And this small truck, advertised by Tata Motors as the ‘ Chota Haathi' (small elephant capable of big things), has been a companion in many a successful entrepreneurial journey at the clich├ęd bottom of the pyramid.

Ace is one product for Tata Motors where product engineering, marketing strategy and branding have worked perfectly well. Five years in existence and the Ace's sales have crossed five lakh.

When Ace, the country's first four-wheel mini truck was launched in 2005, it broke open a new segment of sub-one tonne small commercial vehicles.

It got an immediate market reception as it became the single largest brand for Tata Motors in less than 18 months of its launch. The Tatas have been ruling the small commercial vehicle segment for the last five years, thanks to the Ace which breaks its sales records each passing month, with interesting new variants being added to the portfolio from time to time.

Tata Motors sold 1.6 lakh vehicles on the Ace platform in the last fiscal. “This fiscal, we expect sales will cross 2.25 lakh units,” Ravi Pisharody, President (Commercial Vehicles), Tata Motors told BrandLine.

Having identified an opportunity in the big gap in the market space between three-wheeler pick-ups and six-wheel light trucks such as Tata 407, Tata Motors had intensely worked on the concept of a mini-truck.

The project officially kicked off in December 2000. Extensive market research and a robust tradition in truck-making came in handy for Tata Motors. Five years down the line, the company came out with the first four-wheel truck, powered with a 700 cc two-cylinder version of the first generation Indica engine, developed in-house.

Timely launch

“The Tatas have the knack of coming up with the right product at the right time, be it Indica, Sumo or Ace,” says S. P. Singh, co-ordinator of the Indian Foundation of Transport Research and Training (IFTRT). “Indica and Sumo were not technologically outstanding products. Yet these vehicles established themselves in the market as they responded to the needs of people. In the case of Ace, besides a thorough market understanding, the Tatas took a lot more care on the product side.”

“The distribution and retailing pattern in the cities was shaping up in a distinct way where everyone wanted things, be it fridges, TVs or vegetables, to be delivered at their doorstep. In the narrow congested city lanes, Ace proved to be flexible, comfortable and fuel-efficient,” he said.

Having got the product ready, Tata Motors pulled out all the stops to ensure the success of Ace. It first wooed the three-wheeler owners. The change in their social profile ‘ Rickshawaale se motor malik' was the attraction.

Ace had a strong appeal in the rural markets too where bullock carts and muddy paths gave way to small pick-ups and tarred roads.

With many first-time users, particularly the unemployed youth, turning into owner-drivers Ace became a preferred vehicle for last mile transportation.

To reach out to potential buyers in interior India, Tata Motors opened 600 small sales outlets at the tehsil/district level, taking the total sales touch points to over 1,000. Another smart move was to facilitate vehicle financing with tie-ups with 117 banks – mainly public sector, Gramin and co-operative banks spread across rural India.

“When Ace was launched it was the only product in that segment of low tonnage trucks. Tatas obviously got the first-mover advantage,” says Vaishali Jajoo, Senior Analyst, Angel Broking. According to her, the structural change that happened in transport with the introduction of the ‘hub and spoke' model in cities — where heavy trucks ferry things up to a certain point on the outskirts from where small vehicles take it to the delivery point — worked to the advantage of Ace.

“There is still a huge market for the product. However, since every player has jumped on to it, interesting competition will be played out. The economic growth, particularly the retail activity, will drive the mini truck segment,” she says.

All along the amazing ride of the Ace, Tata Motors has shown savvy product diversification skills. Currently, the Ace family has its original base model mini truck, a passenger carrier in Magic, a CNG-run version, Ace Ex with the fuel-efficient start-stop technology and Super Ace with one tonne payload. Product innovation continues as the Tatas come out with a four-seater people carrier Magic Iris. The vehicle is being test-marketed currently. A 0.5-tonne truck is set to be launched anytime soon.

The success of Ace, a mini truck with sub-one tonne payload at Rs 2.5 lakh price point, has attracted other manufacturers too. Now Mahindra, Force Motors and Piaggio have come out with similar products. Ashok Leyland too is considering an entry into this segment.

“The market requirement is bound to be much higher. The segment will surely grow. The micro enterprising facilitated by small trucks paves the way for huge employment generation,” says IFTRT's Singh.

Sitting at his office-cum-bedroom – an extension of his chawl - adorned with the photographs of his parents and grandfather, Yadav finds it difficult to answer all the calls he gets on his three mobile phones, mostly for hiring his vehicles.

This is precisely why Tata Motors is looking out for a second plant for Ace, besides ramping up the capacity of the Pantnagar plant to 2.75 lakh units a year.

Originally published in Business Line on September 9, 2010

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